The Fraser Institute

The Fraser Institute

December 10, 2007 06:00 ET

The Fraser Institute: Global Petroleum Survey Views Investment in Newfoundland as Carrying Same Risk as Russia and Iran

CALGARY, ALBERTA--(Marketwire - Dec. 10, 2007) - Newfoundland & Labrador is considered by petroleum industry experts as the worst province in Canada for investment in oil and gas exploration and development, according to the first global survey of upstream petroleum companies released today by independent research organization The Fraser Institute.

The Global Petroleum Survey 2007 ranks Newfoundland & Labrador in the same company as Russia, Iran, Pakistan, and Cuba as areas with policies that discourage investment in oil and gas exploration and development.

"Survey respondents were clear that the dispute between the government of Newfoundland & Labrador and companies looking to develop the Hebron field is not encouraging investment. They were especially critical of the government's desire to have an equity position in the Hebron development," said Gerry Angevine, senior economist with The Fraser Institute's Centre for Energy Policy Studies and lead author of the survey.

Provincial taxation policies and a lack of available skilled labour were also cited as negative factors affecting Newfoundland & Labrador's ranking, he added.

Saskatchewan and Alberta were rated as the two provinces with policies most encouraging for investment. Colorado and Wyoming were the top two U.S. states. Malaysia, Romania, Qatar, and Thailand were rated as best locations overall for petroleum investment.

"Surprisingly, the survey showed Saskatchewan is seen as a more favourable province for investment than Alberta. And the survey was conducted before the Alberta Royalty Review panel released its report suggesting Alberta should raise royalties," Angevine said.

"Although Saskatchewan's tax policies were viewed more negatively than Alberta's, Saskatchewan got higher marks for labour availability and other factors, including the cost of regulatory compliance."

Modeled after the popular Fraser Institute Survey of Mining Companies, the Global Petroleum Survey 2007 is designed to help measure and rank the investment climate of various oil and gas producing regions.

The survey results are used to rank jurisdictions according to the barriers to investment posed by existing policies and institutional arrangements. This is done through the use of a number of composite indexes which measure responses to survey questions pertaining to the impact on investment of fiscal terms (royalties and licensing agreements), taxation, the local price of natural gas, the cost of regulatory compliance, regulatory uncertainty, environmental regulations, local processing requirements, trade and labour regulations, local public infrastructure, business infrastructure, quality of the geological database, labour availability, native land claims, political stability, and security concerns.

All-Inclusive Composite Index

According to the All-Inclusive Composite Index results, the five jurisdictions with the greatest barriers to investment are: Bolivia, Venezuela, Ecuador, Russia and Iran. The five jurisdictions with the next highest barriers are Argentina, Cuba, Angola, Nigeria, and Newfoundland and Labrador, in that order.

The United Kingdom, Malaysia, Romania, Qatar, Thailand and Colorado were rated as the most attractive investment locations.

Saskatchewan was the highest rated Canadian province overall, while Newfoundland & Labrador was rated as the worst of all Canadian jurisdictions.

Commercial Environmental Index

The Commercial Environment Index looks at the commercial barriers to investment such as fiscal terms, taxation, business infrastructure, and labour availability. Thailand, Trinidad & Tobago, Peru, Wyoming, and Colorado ranked the highest since the barriers posed by these factors are seen to be lower than other jurisdictions. Saskatchewan was the highest ranked Canadian province.

Bolivia, Venezuela, Ecuador, Newfoundland and Labrador, and Russia received the lowest rankings.

Regulatory Climate Index

The Regulatory Climate Index measures cost of regulatory compliance, regulatory uncertainty, and environmental regulations. The Northwest Territories shared top spot in the Regulatory Climate Index ranking with Colorado, Peru, Qatar, Romania, and Thailand.

Regulatory barriers to investment were seen to be greatest in Venezuela, Bolivia, Ecuador, Russia and Iran. Venezuela and Bolivia, in particular, had high percentages of responses from survey participants who said that they would not invest in those countries. Newfoundland & Labrador was the lowest ranked Canadian province.

Business Environment Index

The Business Environment Index combines information pertaining to commercial conditions and the regulatory environment which underlie both the Commercial Environment Index and the Regulatory Climate Index. Malaysia, Qatar, Romania, Thailand and Peru had the highest rankings. Venezuela, Bolivia, Ecuador, Russia, and Argentina were seen to have the greatest barriers to investment stemming from commercial and regulatory factors.

Among Canadian provinces, Saskatchewan, Alberta and British Columbia were the highest ranked while Newfoundland & Labrador was the lowest ranked.

Geopolitical Risk Index

The Geopolitical Risk Index measures views on political stability and security. Venezuela, Bolivia, Nigeria, Iran and Ecuador were ranked the lowest in this index. Survey respondents singled out Venezuela and Bolivia as having the highest risk for security and stability.

The Fraser Institute is an independent research and educational organization with offices in Calgary, Montreal, Tampa, Toronto, and Vancouver. Its mission is to measure, study, and communicate the impact of competitive markets and government intervention on the welfare of individuals. To protect the Institute's independence, it does not accept grants from governments or contracts for research. Visit

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